What Is CAGR?
CAGR stands for Compound Annual Growth Rate. It tells you the average yearly growth rate between a starting value and an ending value, assuming smooth compounding. It’s widely used to compare investments, business revenue growth, or any metric that changes over time.
When CAGR Is Useful
- Comparing two investments over different time periods.
- Evaluating business revenue growth over multiple years.
- Estimating the “smoothed” annual return from a start and end value.
Related Calculators
- Compound Interest Calculator — growth with contributions.
- Investment Calculator — future value projections.
- Dividend Yield Calculator — yield % + income estimate.
- Percentage Calculator — quick % changes.
Frequently Asked Questions
1) Does CAGR include volatility?
No. CAGR smooths growth into a single annual rate. Real results may rise and fall in between.
2) Can CAGR be negative?
Yes. If your ending value is lower than your starting value, CAGR will be negative.
3) What’s the difference between CAGR and average return?
CAGR accounts for compounding. A simple average return can mislead when returns vary year to year.
4) What if my years value is not a whole number?
You can use decimals (example: 2.5 years). The formula still works and the estimate stays consistent.
5) Is the growth table exact?
It’s a projection using the calculated CAGR. It shows a smooth path, not real market fluctuations.